The coal fired power industry has undergone many regulatory changes in recent years. Federal environmental regulations are targeting sulfur dioxide (“SO2“), nitrogen oxide (“NOx“), and mercury emissions from coal-fired power plants. Small coal-fired generating stations are finding it too costly for the pollution control equipment needed to comply with these regulations and are expected to shut down over the next several years. This will remove a significant amount of electric generating capacity from the market.
According to the Energy Information Administration (EIA), more than 34 GW of coal capacity is expected to be retired as a result of more stringent environmental regulations, representing about 10 percent of total U.S. coal-fired power plant capacity. The facilities scheduled for retirement share the same characteristics: small size (under 600 MW), low capacity factor, lack modern pollution control equipment, and are considered to be the dirtiest facilities in the country. Despite political efforts against coal-fired electricity generation, some new coal-fired capacity have been added to the market. However, retirements are expected to outpace additions over the next 10 years. The majority of coal-fired capacity additions consists of expansions to current power plants, with little or no greenfield site construction.
To compensate for the expected loss of small coal-fired power plants, new natural gas fired plant construction and installation of alternative sources such as solar panels and wind turbines are anticipated. Increases in electricity prices and capacity payments will ensure sufficient profitability for new construction. Also, the larger coal-fired power plants with the latest pollution control technology will increase production.
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